Depression and anxiety are often seen as pathological emotional states, without adaptive value. Although they may become pathological, for the normal person these emotions may be essential control processes, guiding thought and behavior. Understanding the distortions of judgement caused by pathological anxiety and depression may first require understanding the adaptive process through which emotional responses to life events regulate the cognitive appraisal of those events. Emotions may influence multiple levels of neural organization, including elementary brainstem arousal mechanisms, limbic representations of threat and pleasure, and differential hemispheric contributions to cognitive representation. Our initial studies have shown that optimistic or pessimistic mood states influence normal subjects' expectancies for the outcomes of daily life events, and this influence may be indexed by the N400 brain electrical effect that is sensitive to semantic expectancy. The present research has six aims. (1) Examine mood-congruent biases in the evaluation of daily life event that may occur with normal states of depression and anxiety. Test whether the initial mood induciton findings will generalize to individual differences in depression and anxiety in normal university students. (2) Examine mood-congruent biases in the evaluation of daily life events in community samples who meet diagnostic criteria for major depressive disorder, generalized anxiety disorder, and dysthymic disorder. (3) Determine whether anxiety and depression influence the evaluation of major life events. For both the student and community samples, analyze whether the N400 mood-congruence effect in evaluating daily life events will be predictive of the subjective ratings of major life events. (4) Develop a new paradigm for examining emotional influences on the process of normal self-evaluation. The rapid (400 ms) response of the brain electrical measure may provide a unique window on the subject's self-evaluative semantic processes that are shown only indirectly by conventional self- report psychometrics. Analysis of social desirability measures may clarify whether depression operates at the primitive, automatic or the more elaborated, self-presentation level of the self-concept. (5) Extend this paradigm to amine the emotional influence on self-evaluation in community samples meeting diagnostic criteria for major depressive disorder, generalized anxiety disorder, and dysthymic disorder. (6) Clarify the nature of the N400 effect with methodological advances in dense array measurement, single-trial analysis, 3D spline-Laplalcian analysis, principal components analysis of superposition, and a new approach to anatomically-constrained source localization of the N400 and LPC effects.